Three Outside Up
Reference values based on Bulkowski's "Encyclopedia of Chart Patterns". Data is primarily from U.S. markets and may differ for other markets.
A confirmation pattern for the bullish engulfing. After a large bullish candle completely engulfs a small bearish candle, the third bullish candle closes at an even higher level to confirm the reversal. More reliable than a standalone engulfing pattern, it serves as a powerful buy signal at bottoms.
Enter long at the next candle's open after the third bullish candle closes above the second candle's high. Confirm the third candle clearly closes above the second.
Project the second engulfing candle's range upward from the third candle's close. Or target the nearest resistance line.
Place a stop-loss slightly below the second engulfing candle's low. Or below the entire pattern's low.
Ideally, volume increases significantly on the second engulfing candle and remains high on the third. Volume increase indicates genuine buyer participation.